A study by Edelman Berland reveals that
33% of homeowners who are contemplating selling their house in the near future
are planning to scale down. Let's look at a few reasons why this might make
sense for many homeowners, as the majority of the country is currently
experiencing a
seller's
market. In a recent blog, Dave Ramsey, the financial guru,
highlighted
the advantages of selling your current house and downsizing into a smaller home
that better serves your current needs. Ramsey explains three potential
financial advantages to downsizing:
- A smaller home means less space, but it also means less
time, stress and money spent on upkeep.
- Let's assume you save $500 a month on your mortgage
payment. In 30 years, you could have an additional $1-1.6 million in the
bank to get you through your golden years.
- Use the proceeds from selling your current home to pay
cash for a smaller one. Just imagine what you could do with no mortgage
holding you down! If you can't pay cash, aim for a 15-year fixed rate
mortgage and put at least 10-20% down on your new home. Apply the $500 you
saved from downsizing to your new monthly payment. At 3% interest, you
could pay off a $200,000 mortgage in less than 10.5 years, saving almost
$16,000 in the process.
Realtor.com also addressed downsizing in
a recent
article. They suggest that you ask yourself some questions before deciding
if downsizing is right for you and your family. Here are two of their questions
followed by their answers (in italics) and some additional information that
could help.
Q: What
kind of lifestyle do I want after I downsize?
A: "For some folks, it's a
matter of living a simpler life focused on family. Some might want to cross off
travel destinations on their bucket lists. Some might want a low-maintenance
community with high-end upgrades and social events. Decide what you want to
achieve from your move first, and you'll be able to better narrow down your
housing options."
Comments: Many homeowners are taking
the profit from the sale of their current home and splitting it in order to put
down payments on a smaller home in their current location, as well as a
vacation/retirement home where they plan to live when they retire. This allows
them to lock in the home price and mortgage interest rate at today's values.
This makes sense financially as both home prices and interest rates are
projected to rise.
Q: Have I
built up enough equity in my current home to make a profit?
A: "For most homeowners,
the answer is yes. This is if they've held on to their properties long enough
to have positive equity that will be sizable enough to put a large down payment
on their next home."
Comments:
A study
by Fannie Mae revealed that only 37% of Americans believe that they
have significant equity (> 20%) in their current home. In actuality, CoreLogic's
latest Equity Report revealed that 72.6% have greater than 20% equity.
That equity could enable you to build the life you've always dreamt about.
Bottom Line
If
you are debating downsizing your home and want to evaluate the options you
currently have, meet with a real estate professional in your area who can help
guide you through the process.
Looking to Buy, Sell, or Invest? Contact:
David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist
David@AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!
